CPAN Members Outraged by Revelations of Auto Insurance Kickback Scheme, Offer Solutions to Stop Fraud

LANSING – The Coalition Protecting Auto No-Fault (CPAN) responded today to reports by the Detroit Free Press detailing a complex scheme between Southeast Michigan doctors and lawyers to illegally profit from Michigan’s no-fault system.

“The allegations in this report are very serious,” said CPAN President John Cornack. “If found to be true, this type of behavior damages the entire no-fault system and those who work so hard to protect it.”

The report is based on an affidavit from Dr. Ram Gunabalan, which details a coordinated series of kickbacks between attorneys and health care providers treating auto accident victims.

“CPAN is shocked and disgusted by the accusations made in the Free Press stories. These are exactly the types of fraudulent practices that our organization is hoping to root out of Michigan’s no-fault system through our reform proposals,” said Cornack. “Every time no-fault fraud takes place, it makes it that much harder for legitimate accident victims to get the care they need. We look forward to working with the legislature to tackle this issue as soon as they return to Lansing.”

CPAN has proposed a comprehensive package of 24 reforms to Michigan’s no-fault system that will reduce auto insurance fraud, improve consumer protections and reduce costs while still ensuring catastrophic accident victims have access to the care they need. Details of CPAN’s no-fault reforms can be found at FixNoFault.org.

 

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Covenant Medical Center v. State Farm: A Disastrous Destabilization of Michigan’s Auto No-Fault System

By:  CPAN Legal Team

On May 25, 2017, the Michigan Supreme Court issued a landmark decision in the case of Covenant Medical Center, Inc., v. State Farm Mutual Automobile Insurance Company.  In a 5-1 decision, the Court took away significant legal rights of healthcare providers who care for auto accident victims.  The Court held that healthcare providers do not have a right under the No-Fault Act to sue no-fault insurers for services rendered to patients.  As the Court stated:  “We therefore hold that healthcare providers do not possess a statutory cause of action against no-fault insurers for recovery of personal protection insurance benefits under the no-fault act.”

The Covenant decision marks a radical departure from over 20 years of case law from the Michigan Court of Appeals, who repeatedly held that healthcare providers had a statutory cause of action against no-fault insurers.  Yet the Covenant Court called such longstanding decisions “unconvincing” and “devoid of the statutory analysis necessary to support that premise.”

Unfortunately, the Covenant decision begs more questions than it answers.  The Court offered little or no guidance on critical issues surrounding the implementation of the holding, including the following:

  • Retroactivity v. Prospectivity: The Court did not address whether its decision is retroactive (i.e., applying to all cases currently in litigation) or prospective (i.e., applying to cases filed after the decision).  The answer to this question will have enormous financial implications for healthcare providers who have pending lawsuits that relied on the established case law that Covenant overruled, and it could therefore result in hundreds of millions of dollars in unpaid medical expenses.  Unfortunately, the Court has left the answer to this question to the trial courts – a process that will result in significant delay, confusion, and inconsistency.
  • Assignments of Benefits from Patient to Provider: In an important footnote, the Court stated: “[O]ur conclusion today is not intended to alter an insured’s ability to assign his or her right to past or presently due benefits to a healthcare provider.”  Yet Section 3143 of the No-Fault Act prohibits the assignment of future  There will thus be great uncertainty over how to handle cases involving assignments, particularly when a provider continues to render treatment to an injured person while litigation is pending.

One result is clear: Covenant puts the injured person in the cross-hairs of litigation.  The Court held that a healthcare provider’s sole recourse is to “seek payment from the injured person for the provider’s reasonable charges.”  Thus, healthcare providers will now be forced to sue their patients for unpaid balances.  This will mean more auto accident victims retaining more lawyers and more lawsuits filed – all of which our no-fault system was designed to avoid.


Michigan Supreme Court Ruling Pits Patients Against Providers When Insurers Refuse to Pay

LANSING – The Michigan Supreme Court yesterday ruled in a landmark decision that will prevent medical providers from suing insurance companies on behalf of auto accident patients for payment of services rendered. The case, Covenant Medical Center v State Farm Mutual Auto Insurance, is expected to result in a windfall of profits for insurance companies and will greatly increase lawsuits in Michigan’s no-fault system while leaving patients on their own without a safety net.

“This decision is a nightmare for consumers. It puts patients squarely in the crosshairs of litigation, because health care providers will no longer be able to battle insurance companies on behalf of their patients. The responsibility will be placed solely on the patient to make sure their insurance company is reimbursing their doctor for the treatments received,” said CPAN President John Cornack. “This will create scenarios where doctors and hospitals will be forced to sue the very same patients they are caring for, and then patients will turn around and sue their insurance companies. Everyone will be lawyering up and litigation will go through the roof, which is exactly what no-fault insurance was designed to avoid.”

Cornack notes the decision will likely result in millions of dollars of medical expenses going unpaid because many patients will not have the knowhow or resources to fight for the services they need.

“It is well documented that medical expenses are the leading cause of bankruptcy, and this Supreme Court decision will only add to that problem,” said Cornack.

The Supreme Court decision may retroactively impact current auto accident cases, which could result in the dismissal of thousands of lawsuits across the state against auto insurance companies that have not paid medical expenses.

“This is yet another example of how insurance companies are using the courts to rewrite Michigan’s auto insurance laws,” said Cornack. “The thousands of patients who will lose their care due to this case will mean a multi-million dollar windfall for auto insurance companies while people suffer. CPAN is calling on lawmakers to immediately take action to correct the injustices of this case and protect patients across the state from the financial ruin that will surely result if it is allowed to stand.”

 

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CPAN Responds to Michigan Supreme Court Refusal to Hear No-Fault Transparency Case

LANSING – Michigan Supreme Court has decided not to hear the Coalition Protecting Auto No-Fault’s case that would have shed light on the state’s auto insurance system. CPAN had sought to open the Michigan Catastrophic Claims Association’s rating practices to public scrutiny via the state’s Freedom of Information Act.

“This is a very disappointing day for those who are committed making Michigan’s auto insurance system more affordable. Every Michigan driver pays into the MCCA the only way to determine whether the rate assessments are fair and appropriate is to make the rate making data subject to Michigan’s FOIA law, said CPAN President John Cornack. “If the Michigan legislature is serious about making no-fault insurance more affordable it must begin the process of learning the facts – and that starts with transparency at the MCCA.”

The MCCA is a private non-profit organization created by Michigan Legislature in 1978. Its board is controlled entirely by insurance company representatives. The organization serves as a reinsurance fund that reimburses auto insurance companies for personal injury claims exceeding $545,000. Each Michigan driver currently is required to pay $160 annually per vehicle to fund the MCCA. At the end of June, that fee rises to $170.

CPAN’s FOIA lawsuit sought to open the MCCA’s rate-making data to gain an understanding how rates are set and how the organization’s $20 billion in assets are being managed. The Michigan Court of Appeals ruled last year that the MCCA is a “public body” as defined by Michigan law, but disagreed with CPAN’s assertion that the organization’s FOIA exemption is unconstitutional.

“The Supreme Court’s action today refuses to examine the Court of Appeals ruling. As a result, even though the MCCA is a ‘public body’ that would otherwise be subject to FOIA, it will be able to continue hiding behind this other statute which will deprive Michigan citizens’ right to access the truth,” said Cornack.

CPAN took the MCCA’s FOIA exemption to the Michigan Supreme Court, arguing that the exemption was unconstitutional because the state FOIA law itself was never amended. The Michigan Association of Broadcasters and Michigan Press Association agreed with CPAN’s argument an issued amicus briefs to the Michigan Supreme Court urging them to take up the case.

“At its core, this case was not about auto insurance but about transparency in government. It will now be much easier to the legislature to hide FOIA exemptions in other statutes, which makes it that much harder to know what is and what is not actually exempt from FOIA,” said Cornack.

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CPAN announces reforms to fix Michigan’s no-fault system, protect accident victims

Reforms will improve auto insurance efficiency, transparency, fairness and accountability

Lansing, Mich. – Medical providers, brain injury advocates and legal experts joined the Coalition Protecting Auto No-Fault (CPAN) today to reveal the organization’s proposals to bring much needed efficiency, transparency, fairness and accountability to Michigan’s auto no-fault system.

“Michigan’s no-fault laws are critical to the care and rehabilitation of tens of thousands of auto accident victims every year, but we also know the system is not perfect. There are a number of issues that need to be addressed and we are committed to finding the appropriate solutions,” said CPAN president, John Cornack. “The reforms CPAN is proposing are specific, surgical reforms that will improve Michigan’s auto insurance system while also guaranteeing that our state’s most seriously injured people will still be able to receive the care they need.”

CPAN’s list of 24 reforms can broadly be broken down into two main categories: those that promote premium reductions and costs savings, and those that increase fairness.

Reforms that promote cost savings include:
• Adopt a fee schedule for health care providers treating auto accident victims
• Cap hourly rates for family-provided attendant care
• Aggressively tackle fraud and claims handling abuse

“CPAN has continuously been a staunch advocate for the creation of a balanced fraud authority, and insurance companies have been asking lawmakers for several years to adopt cost containment measures, including fee schedules and attendant care, so we believe we have landed on some strong reforms where we can find common ground and make real change happen in the Lansing this year,” said Cornack.

Cornack notes that CPAN had aggressively opposed both fee schedules and caps on attendant care in previous years. By agreeing to a reasonable fee schedule based on 185 percent of the Workers Compensation schedule, CPAN aims to prevent what has become a standard insurance company practice of delaying payments and underpaying health care providers. Under CPAN’s proposal, Level 1 trauma centers would not be subject to an auto no-fault fee schedule.

Reforms that promote fairness include:
• Stop non-driving rating factors, such as credit scores, from impacting insurance rates
• Require auto insurers to obtain prior authorization before implementing a rate increase
• Subject the Michigan Catastrophic Claims Association (MCCA) to Michigan’s transparency laws

“Credit scores and other non-driving factors have been proven to disproportionately impact minorities and low-income drivers,” said Brain Injury Association of Michigan President Tom Constand. “And given that Michigan law requires all drivers to purchase auto insurance, we believe the state should review and authorize rate increases before they take effect, just like they do with our utility bills.”

The MCCA was created by Michigan Legislature and serves as a reinsurance fund that reimburses auto insurance companies for personal injury claims exceeding $545,000. Each Michigan driver currently is required to pay $160 annually per vehicle to fund the MCCA, and it currently holds about $20 billion in assets. CPAN currently has a lawsuit in the Michigan Supreme Court that would force the MCCA to open its ratemaking data to public scrutiny.

“Drivers have no choice but pay into the MCCA each year, but they also have no idea how those rates are set and no way to determine whether the fund is being appropriately managed,” said Cornack. “Our reforms will lift the shroud of secrecy at the MCCA and give consumers a better idea of how their rates are set.”

The full details of CPAN’s 24 auto no-fault insurance reforms are available on its website at ProtectNoFault.org. The organization and its members plan to work in a bi-partisan manner with both lawmakers and insurance companies introduce and pass its reforms by the end of this year.

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Additional Documents:

Fact Sheet

Frequently Asked Questions

Detailed List of Reforms


Without Transparency, Michigan Catastrophic Claims Association is Taxation Without Representation

LANSING – Coalition Protecting Auto No-Fault (CPAN) President John Cornack used today’s tax filing deadline to take the Michigan Catastrophic Claims Association (MCCA) to task for practicing “taxation without representation.”

The MCCA is a private non-profit organization created by Michigan Legislature in 1978. It serves as a reinsurance fund that reimburses auto insurance companies for personal injury claims exceeding $545,000. Each Michigan driver currently is required to pay $160 annually per vehicle to fund the MCCA. In June, that fee rises to $170.

“Our founding fathers were adamant that there should be no taxation without representation, yet that is exactly what we have happening with the MCCA,” said Cornack. “Here we have an organization created by the Legislature that holds more than $18 BILLION of the public’s money, operating with no real public oversight. It’s a travesty.”

MCCA’s board includes AAA Insurance, Auto-Owners, Citizens Insurance, Farmers Insurance and State Farm. The Michigan director of the Department of Insurance and Financial Services serves as a non-voting ex-officio member. MCCA board meetings are not subject to the Open Meetings Act, and the organization refuses to comply with state Freedom of Information Act laws.

CPAN has filed a FOIA lawsuit seeking to open the MCCA’s rate-making data. The Michigan Court of Appeals ruled last year that the MCCA is a public body as defined by Michigan law, but disagreed with CPAN’s assertion that the organization’s FOIA exemption is unconstitutional. The case is currently in the State Supreme Court.

In addition, legislation has been introduced in both the State House and Senate that would bring transparency to the MCCA. Senate Bills 240 and 241 would require MCCA to abide by Michigan’s Open Meetings and FOIA laws. House Bill 4354 would do the same but also require a member of the public to also sit on the MCCA board and give the State Insurance Commissioner the authority to disapprove of MCCA rate charges that are deemed excessive.

 

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CPAN Calls on State of Michigan to Investigate Auto Insurance Redlining in Detroit

ProPublica Story Shows Why Michigan Needs to Investigate Whether Auto Insurance Companies are Engaged in Redlining

LANSING – The independent nonprofit journalism organization ProPublica recently published a report examining auto insurance premiums and payouts in California, Illinois, Texas and Missouri. The report finds that insurers charged as much as 30 percent more for premiums in zip codes where most residents were minorities, compared to white neighborhoods with similar accident risks or costs.

ProPublica notes that many auto insurers included in the study operate nationally, which means that “minority neighborhoods across the country may be paying too much for auto insurance, or white neighborhoods, too little.”

In response to the story, the Coalition Protecting Auto No-Fault is calling on the Michigan Department of Insurance and Financial Services to conduct a similar study in Michigan’s urban communities.

“Detroit drivers pay some of the highest auto insurance premiums in the country and insurance companies cannot justify it any longer. It doesn’t make sense that drivers are getting charged significantly more for premiums simply because they live on one side of 8 Mile verses the other, but that’s exactly what’s happening,” said CPAN President John Cornack.

“The person living on the Ferndale side of 8 Mile still is driving the same roads and would be going to the same hospitals, yet the Detroit resident gets charged far more. That sounds an awful lot like redlining to me and we are calling on the state to look into it.”

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Group Launched to Fight for Fair Auto Insurance Rates in Detroit

Several community leaders in Detroit joined together today to raise their voices against Detroit’s high auto insurance rates. Spearheaded by former State Rep. Brian Banks, the Detroit Alliance for Fair Auto Insurance launch included Detroit City Council President Brenda Jones, Spirit of Love Church Pastor DaRell Reed and auto accident survivor Saundra Gay.

The new organization will seek to educate Detroit residents about Michigan’s auto insurance system and empower them to be advocates for fair auto insurance reforms at the state capitol. Key issues raised at the news conference, which can be viewed on the group’s Facebook page, include the insurance company practice of using non-driving related factors like credit scores to set higher rates, and redlining in Detroit.

Ms. Gay, who was injured in a rollover accident in 2000, is quoted on the group’s news release as saying “I’m alive today and able to be a productive member of society because of the care and upport provided by Michigan’s no-fault auto insurance coverage. It’s critical that lawmakers in Lansing do everything they can to reduce rates while ensuring accident victims get the care they need.”

The Detroit Alliance for Fair Auto Insurance said it plans to hold a series of town hall discussions throughout Detroit in May where they will educate residents about their auto insurance policies and discuss ideas for lowering auto insurance rates.

CPAN is pleased to see that the organization was adamant that any changes to Michigan’s no-fault system must protect accident survivors while also lowering rates.

More information about the Detroit Alliance for Fair Auto Insurance can be found at www.DetroitFairInsurance.org.

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CPAN Praises No-Fault Transparency Legislation

LANSING – Sen. Steve Bieda (D-Warren) introduced legislation today that would bring much needed transparency to Michigan no-fault auto insurance system. The legislation, Senate Bills 240 and 241, requires the Michigan Catastrophic Claims Association (MCCA) to abide by Michigan’s Open Meetings and Freedom of Information (FOIA) acts.

In addition to Sen. Bieda’s bills, Reps. Henry Yanez (D-Sterling Heights) and Abdullah Hammoud (D-Dearborn) introduced House Bill 4354 in the State House. In addition to subjecting the MCCA to the Open Meetings Act and FOIA, his bill would require the State Insurance Commissioner to appoint a member of the public to sit on the MCCA board and empower the commissioner to disapprove of any total MCCA charge the commissioner deems excessive.

The MCCA is a fund created by the state legislature that reimburses Michigan auto insurers for personal injury claims above $555,000. The $18.8 billion fund is governed by a board of insurance industry executives who refuse to comply with state transparency laws.

In support of the legislation, CPAN spokesperson Josh Hovey issued the following statement:

“Today, more than ever, transparency is essential for a functioning democracy. We hope lawmakers from both parties will join together to support transparency and accountability for their constituents and all Michigan drivers.

“The MCCA is a critical piece of Michigan’s auto insurance system because it enables auto insurance companies to provide lifetime coverage for our state’s most seriously injured accident victims. But as a state-created organization that charges $170 on every insured vehicle in Michigan, the public expects transparency. If the insurance company executives are confident that’s a reasonable charge, they should have no problem opening up the MCCA books to public scrutiny.

CPAN has issued several Freedom of Information Act (FOIA) requests to the MCCA in an attempt to obtain the organization’s rate-making data, but those requests have been denied. CPAN and the Brain Injury Association of Michigan are currently involved in a FOIA lawsuit against the MCCA. That lawsuit is now in the Michigan Supreme Court.

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 The Coalition Protecting Auto No-Fault: The Coalition Protecting Auto No-Fault is a broad-based coalition of consumer advocate groups, lawyers, doctors, nurses and other health care providers working together to keep Michigan’s model no-fault insurance law intact. Learn more about CPAN by visiting www.ProtectNoFault.org.  


Michigan Drivers Handed Secretive $10 Auto Insurance Rate Increase

LANSING – The Coalition Protecting Auto No-Fault (CPAN) learned today that Michigan drivers will pay an additional $10 on their auto insurance premiums this year. The cost increase is the result of the insurance industry-controlled Michigan Catastrophic Claims Association (MCCA) increasing the fee charged to every Michigan auto insurance policy from $160 to $170 per vehicle.

The MCCA is a reinsurance fund created by the state legislature that helps reimburse insurers for costs of caring for catastrophic auto accident victims for any claim above $555,000. The organization, which reports holding $18.8 billion in assets, is governed by a board of insurance industry executives and is not subject to state Open Meetings or Freedom of Information laws.

In response to today’s announcement, CPAN spokesperson Josh Hovey issued the following statement:

“The MCCA is an important tool that helps ensure Michigan’s most seriously injured auto accident survivors receive the care they need. But the public has a right to know how it sets its rates. This is an organization created by our state government that is allowed to be controlled entirely by insurance companies without any transparency whatsoever. It’s unacceptable.”

CPAN has issued several Freedom of Information Act (FOIA) requests to the MCCA in an attempt to obtain the organization’s rate-making data, but those requests have been denied. CPAN and the Brain Injury Association of Michigan are currently involved in a FOIA lawsuit against the MCCA. That lawsuit is now in the Michigan Supreme Court.

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The Coalition Protecting Auto No-Fault: The Coalition Protecting Auto No-Fault is a broad-based coalition of consumer advocate groups, lawyers, doctors, nurses and other health care providers working together to keep Michigan’s model no-fault insurance law intact. Learn more about CPAN by visiting www.ProtectNoFault.org.